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Home Sellers Find a Strong Position With Lack of Inventory

The recent drop in available inventory of homes for sale is affecting real estate markets nationwide. While we’re seeing stiff competition for homes in Seattle, sellers are also finding that they have a much strong position than they have in years. Home buyers are getting much more aggressive in their bids for properties, with many selling above list price in the first week, and that trend seems to be happening nationwide as well.

Though many home shoppers who assume they are still in a buyer’s market find it hard to believe, one of the sobering fundamentals shaping real estate this summer is shrinking inventory: The supply of houses for sale has fallen significantly in most areas compared with a year earlier, sometimes dramatically so. And that is having important side effects by raising prices and homeowners’ equity stakes and reducing total sales.

In major metropolitan markets from the mid-Atlantic to the West Coast, the stock of homes listed for purchase has dropped by sometimes extraordinary amounts — 50% or more below year-earlier levels in several areas of California, according to industry studies.

In Los Angeles, available inventory is 49% lower than it was last summer, San Diego by 53%, reports Redfin, a national online realty brokerage. In Seattle, listings are off 41%. In Washington and its nearby suburbs, listings are down 28%.

According to the National Assn. of Realtors, the total number of houses listed for sale across the country in June was 24% lower than a year earlier. The dearth of listings is often more intense in the lower- to mid-price ranges, less so in the upper brackets.

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What’s behind the widespread declines in listings?

Analysts say negative equity plays a major role — it discourages people who might otherwise want to sell from doing so. They don’t want to take a big loss, especially in a slowly improving price environment. So they sit tight rather than list. Banks with large stocks of pre-foreclosure and foreclosed properties are doing the same, creating a so-called “shadow inventory” of houses estimated to total 1.5 million units.